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Deadlocked Congress brings government to edge of shutdown

The morning sun illuminates the U.S. Capitol in Washington, Monday, Sept. 30, 2013, as the government teeters on the brink of a partial shutdown at midnight unless Congress can reach an agreement on funding. U.S. stock futures fell sharply Monday morning as the government careened toward closures that would force 800,000 federal workers off the job without pay. Photo: Associated Press/AP Photo/J. Scott Applewhite

By David Lawder and Susan Heavey

WASHINGTON (Reuters) – The Congress, still in partisan deadlock on Monday over Republican efforts to halt President Barack Obama’s healthcare reforms, was on the verge of shutting down most of the government starting on Tuesday morning.

With the law funding thousands of routine government activities set to expire at midnight, a 2 p.m. (1800 GMT) session of the Democratic-controlled U.S. Senate and a later meeting of the Republican-led House of Representative offered little chance of producing an agreement that would keep the government open.

The Senate is expected to take a funding measure backed by the House, strip it of provisions designed to delay President Barack Obama’s healthcare law and send it back again to the House, continuing a game that’s been going on for more than a week.

House conservatives are determined to scuttle “Obamacare, however, and there was no sign that they would relent.

Obama , saying he was not “resigned” to a shutdown, said he planned to talk to congressional leaders later on Monday as well as on Tuesday and Wednesday but held out no new offer of compromise.

Failure to reach an agreement to extend funding would force many federal agencies and programs to close or partially close for the first time in 17 years, putting up to 1 million federal workers on unpaid leave. The military would still function normally, but many civilian employees would be sent home.

Some functions deemed essential, such as U.S. Department of Agriculture meat inspections, would continue. Other agencies, including those in the vast Washington’s regulatory establishment, will be left with skeleton crews for emergencies.

The standoff did not bode well for the next political battle, a far-more consequential bill to raise the federal government’s borrowing authority. Failure to raise the $16.7 trillion debt ceiling by mid-October would force the United States to default on some payment obligations – an event that could cripple its economy and send shockwaves around the globe.

Global stock markets fell and the dollar dropped against major currencies on Monday as investors worried about the prospects of a partial U.S. government shutdown. The Dow Jones industrial average was down 0.5 percent, and the dollar also traded 0.5 percent lower against a basket of six major currencies.

“The House has done its work,” House Speaker John Boehner said on the House floor, referring to the bill passed by the House early on Sunday that would continue funding the government while delaying the health law known as Obamacare for one year and repealing a tax on medical devices. He urged the Senate to pass this bill.

One potential area for compromise, at least as far as some Republicans are concerned, is retaining only the repeal of the medical device tax in the funding measure. In March, more than 30 Democrats in the Senate voted in a non-binding budget resolution to repeal the tax on devices such as artificial joints, which is expected to contribute $30 billion over 10 years to fund health insurance subsidies.

Boehner spokesman Michael Steel said Republicans would consider such a scenario, but added the idea looks moot as the Senate Majority Leader Harry Reid appears intent on keeping the tax in place.

“We will make that decision when and if the Senate acts.”

WALL STREET JITTERS

There was no sign of negotiations on Monday as the Senate vote approached, and Wall Street watched warily as the latest in a series of fiscal showdowns since 2010 stumbled to a conclusion.

“The government is such an important part of the entire economy, between the people it employs and the impact it has on consumer confidence,” said Nicholas Colas, chief market strategist at the ConvergEx Group in New York. “The size of the selloff is logical given the stakes.”

The two parties continued to blame each other on Monday for failing to avoid the impending shutdown. Republicans accused Obama of ignoring their pleas for negotiations.

“This president hasn’t been involved at all with the leadership or with the Congress,” Representative Matt Salmon, an Arizona Republican, told MSNBC’s “Morning Joe” program, adding that Obama has not contacted Boehner in more than a week.

But he said Republicans would not give up their quest to thwart the implementation of Obamacare, a program aimed at providing healthcare coverage to millions of uninsured Americans. Republicans say the launch on Tuesday of new online government health insurance exchanges will cause premiums to rise and deter companies from hiring new workers.

Salmon, who was in Congress during the last shutdown from late 1995 to early 1996, said Republicans do not want to see a shutdown but would keep fighting against Obamacare with another proposal. “We should go back at them,” he said.

DEMOCRATIC SENATOR CONDEMNS ‘EXTORTION’

Democratic Senator Charles Schumer of New York said he was still holding out some hope that the House Republicans “would come to their senses” and vote to keep the government open.

“It is extortion,” Schumer, speaking on “Morning Joe,” said of Republicans’ strategy. “It’s holding the good of the country – the economy, middle-class people at risk.”

Early on Sunday, House Republicans passed measures to attach the Obamacare delay and the repeal of the medical device tax to the stop-gap spending bill that would keep government agencies open until November 15. In a sign that a shutdown may look increasingly inevitable, the House also unanimously passed a measure to keep paying U.S. soldiers in the event of a shutdown.

More people will blame congressional Republicans than Obama if the U.S. government shuts down this week and most want a budget deal to avoid disruption to federal funding and services, a poll released on Monday showed.

Forty-six percent said that if government agencies and programs start closing on Tuesday, they would fault Republicans in Congress while 36 percent said they would blame Obama, the CNN survey found. Thirteen percent said both would be at fault.

About 60 percent of the 803 U.S. adults polled said they want lawmakers to pass a budget agreement to avoid the shutdown, according to the telephone survey conducted over the weekend with a margin of error of plus or minus 3.5 percentage points.